Clark Equipment On Tightrope

June 07, 1987|By Matt O`Connor, Chicago Tribune.

SOUTH BEND, IND. — Clark Equipment Co., which has struggled for survival for most of the 1980s, has another kind of fight on its hands these days: keeping its independence while it completes a long, painful restructuring.

Just when Clark, the nation`s largest maker of forklift trucks, appeared about to rebound, a threat has emerged from Hollywood, of all places. Burt Sugarman, creator of the 1970s TV program, ``Midnight Special,`` and producer of the Oscar-nominated movie, ``Children of a Lesser God,`` has bought a 6.3 percent stake in Clark and said he might seek control.

Sugarman`s disparate empire includes Giant Group Ltd., a cement company, and Barris Industries Inc., a televison production company best known for

``The Dating Game`` and ``The Gong Show.``

He has won plaudits for turning Giant Group around, but Leo J. McKernan, president and chief executive officer of South Bend-based Clark, is unimpressed by the debt loads Sugarman has piled high on both Giant Group and Barris.

``I just suggest he stick to `The Gong Show,` and I`ll stick to the equipment business,`` said McKernan, a fighting Irishman in a town full of them.

Clark is definitely sticking to the equipment business under McKernan, who took over the top post a year ago after the previous executive`s sudden departure, which the company still hasn`t publicly explained.

He`s selling off several service businesses, in an admission that Clark`s efforts at diversification in recent years didn`t pan out. The biggest by far, Clark`s credit subsidiary, was bought by Chase Manhattan Corp. for about $188 million.

Thus, Clark is tying its fortunes to its traditional businesses, the manufacture of axles and transmissions in addition to forklift trucks and construction equipment.

McKernan sees growth even in these mature markets by broadening product lines in promising niches and buying companies in related fields. Clark, he said, is actively seeking to make an acquisition ``of possibly a couple hundred million dollars`` in axles and transmissions or hydraulics.

``There`s nothing wrong with mature markets if you can make money at them,`` he said.

But making money has been a distinct problem for Clark, which has posted only two slim profits in the last five years. Losses in three of those years totaled almost $250 million, including $60.6 million last year.

Clark`s forklift truck business, its major segment, has been particularly hard hit. The Japanese, led by Toyota and Nissan, have made deep inroads into the U.S. market, driving prices down sharply.

Hyster Co., a major Clark competitor that has charged the Japanese with dumping, or selling below cost, certain forklifts in the U.S., contends the Japanese have captured as much as half of the market for gasoline-engine forklifts, the high-volume end of the business.

And even though a weaker U.S. dollar has kept prices from falling further, a medium-sized forklift today sells for $11,000, in contrast to about $15,500 a dozen years ago, McKernan said.

But McKernan expects a major restructuring, nearing completion, to dramatically improve Clark`s results in 1987 and return the company to profitability next year.

Several years ago, Clark closed two plants in Michigan and moved production of its small to medium-sized gasoline-engine forklifts to a modern, nonunion facility in Goergetown, Ky.

But that proved inadequate as foreign competition intensified and the U.S. dollar soared in the early 1980s, giving foreign-made forklifts a major cost advantage.

Now Clark is shifting production of those same forklifts to a South Korean producer, Samsung Heavy Industries. Its last factory in Michigan, at Battle Creek, closed in April, and Clark plans to shut the Georgetown facility by the end of the year.

McKernan estimated Samsung will be able to make forklifts 40 to 45 percent cheaper than Clark could in Michigan. While an improved Clark redesign will help cut costs, lower labor costs make the key difference.

Pay and benefits cost Clark an average of $25 an hour at its unionized Michigan plants, McKernan said. By comparison, Samsung`s labor costs total less than $2 an hour.

With Samsung hitting full production by year-end, Clark expects its worldwide forklift operations to post a profit in 1988 for the first time in years.

Clark`s cost-cutting efforts haven`t been limited to its forklift operations.

Last year alone in its axle and transmission business, Clark sold a plant in Rockingham, N.C., consolidated operations in its facility in Statesville, N.C., shifted certain production to its plants in Belgium and Brazil and bought, at less expense, nearly one-quarter of the materials it once made.

In addition, in a bid to better compete against the giants of the construction-equipment industry, Clark formed a 50-50 venture with Volvo of Sweden. The venture, VME Group NV, has closed 8 of 12 plants and has slated two more, both in Sweden, for closing.